Dufry benefits from policies for SMEs

Domestic retailers complain about 'reverse discrimination'

By Kwak Yeon-soo

The eligibility of Dufry Thomas Julie Korea for operating arrivals duty free shops has been a contentious issue as the Korean subsidiary of Dufry is categorized as a small- and medium-sized enterprise (SME), according to industry analysts, Tuesday.

With only a day left until bidding closes March 14, home-grown retailers say the Korean subsidiary of the world's largest duty free store operator should not be allowed to bid for arrivals shops.

By June, only one store run by an SME will have been allowed to open at the arrival terminals of Incheon International Airport.

The government amended the Korean Customs Acts in 2013 to promote the growth of SMEs, excluding retail giants such as Lotte, Shilla and Shinsegae from bidding.

The Korea Customs Service (KCS) regards Dufry Thomas Julie Korea as an SME, saying it meets all requirements to participate in the bidding because the Korean subsidiary owns more than 50 percent of its shares.

In 2014, Dufry Thomas Julie Korea, set up by Dufry in 2013, won a license as an SME to run duty free shops in the DF2 section of Gimhae International Airport in Busan in 2014.

In February, Incheon International Corp. announced it will allow SMEs to open one arrivals duty free shop in Terminal 1 with a total area of 380 square meters and another one in Terminal 2, which has a total area of 326 square meters.

However, duty free shop operators here expect that Dufry Thomas Julie Korea will likely win the much-coveted license.

An official at SM Duty Free, operated by travel agency Hana Tour, said it is even harder to compete with global firms than retail conglomerates in Korea.

“As a strong multinational retailer in the world, Dufry has greater power and the ability to buy luxury goods at a lower price compared to conglomerates such as Lotte,” a Hana Tour spokesman told The Korea Times.

“The government's decision to allow Dufry to participate in the tender process goes against their initial plan to benefit SMEs. It is clearly hurting the bottom lines of SMEs.”

Another duty free store official, who asked not be named, claimed that government policies are causing “reverse discrimination” against local companies.

“Since Dufry Thomas Julie Korea is a limited liability company, it's not required to disclose details about its owners or spending,” he said. “In order to prevent foreign subsidiaries from taking advantage of privileges given to small firms, the government needs to come up with additional measures.”